Selling reservations

A wave of new startups hope to cash in on restaurant reservations — but are consumers and restaurants going to bite?

By Cotten Timberlake / Bloomberg, New York

Line up or line someone else’s pocket.

Photo: bloomberg

Darren Wolfberg, a stock trader in New York, needed an impressive restaurant for a client dinner. To snag a table at Miss Lily’s, a hip Jamaican eatery in the Village, he paid a fee to have someone else get one for him.

Wolfberg, who forked over US$20 to a reservation site called Zurvu, didn’t relish the idea of paying for something that’s typically free. But in the tight market for the hottest places in town, the 38-year-old said the extra cost is no big deal.

“When you want to go to a good restaurant, that is the kind of premium you have to pay sometimes,” Wolfberg said.

That attitude is fueling a wave of new startups focused on making money from restaurant reservations. Zurvu, Killer Rezzy and other sites are going beyond the territory staked out by OpenTable Inc (OPEN), which is free to diners. The companies are selling bookings a la carte and often share revenue with the establishments, aiming to create a new industry in places like New York and the Hamptons.

For restaurants, the approach brings risks and opportunities. In cases where startups share some of the reservation fee, it represents a new source of revenue. Paid bookings also can help avoid no-show diners. Restaurants are wary, though, of encouraging scalpers — the bane of sports events and music concerts.

While fashionable restaurants in New York, Los Angeles and other foodie towns are thriving, the broader industry could use a boost. Table-service restaurant sales will rise 0.2 percent to $212.4 billion this year, the National Restaurant Association forecasts, much slower than the growth rate for quick-service eateries.

OPEN TABLE’S SUCCESS

The rise of paid reservation Web sites stems from the success of OpenTable, which has let people book tables at restaurants for about 15 years. A third of American adults have now made a reservation on the Internet, according to the restaurant association. That acceptance — combined with the free-spending ways of diners in New York and other top restaurant towns — has convinced startups that they can make money from the process.

“There are hundreds of thousands of individuals in New York who live in a premium product economy,” said Sasha Tcherevkoff, a 40-year-old former restaurateur who founded Killer Rezzy. “They want a product and they don’t mind paying a premium to get that conveniently.”

ZURVU’S SYSTEM

Zurvu — a play on the words “reserve you” and “serve you” — was started in February by David Levin, a 42-year-old former partner in a company that managed social media for consumer-products companies. It charges US$5 a head, which is divided evenly between the site and the restaurant after one dollar is donated to the food charity Wholesome Wave. It has partnerships with about 55 eateries, including Gotham Bar and Grill and Rouge Tomate, and won’t disclose the size of its membership.

Tcherevkoff’s Killer Rezzy started selling reservations in April at US$25 each. It’s working to expand its list of nine partner restaurants, which split the fee revenue 50-50 with the startup. The company also secures tables at about 40 other places at the specific requests of its clients, who currently number fewer than 1,000. Restaurants on the site include the Waverly Inn and Carbone.

“A lot of restaurants have serious trepidation about this concept and some of them are dipping their toes in the water with us,” Tcherevkoff said.